An auditor should give a disclaimer saying that it cannot express an opinion if accounts of the company are incorrect, instead of leaving the audit work halfway, IT veteran T V Mohandas Pai said.
In recent times, scores of auditors have left audit work of companies, mostly listed ones, citing various reasons.
The former Infosys director said now the instances of auditors quitting listed firms "is happening more because Sebi banned Price Waterhouse for two years after the Satyam thing".
"Earlier, the auditors were not afraid. But now, they fear that if they are caught, Sebi would ban them," Pai told PTI in an interview.
Earlier this year, the Securities and Exchange Board of India (Sebi) had barred Price Waterhouse network firms from issuing audit certificates to any listed company in India for two years after finding the audit major guilty in the multi-crore Satyam Computer Services scam that came to light in January 2009.
"If an auditor is taking up an audit, the auditor must have courage to stand up, qualify the accounts or give a disclaimer to say that it can't express an opinion because they are cooked up. They should not just chicken out and go.
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"If they chicken out and go, the regulator should prosecute them," Pai said.
In recent weeks, Price Waterhouse quit audit mandate of Vakrangee and Atlanta, while Deloitte resigned as statutory auditor of Manpasand Beverages. All three are listed companies.
According to Pai, it is not correct if the auditors go halfway and then quit the audit work of the firm, as then "nobody will touch that company".
He said that once the auditors take up an audit work, they must complete it and give a disclaimer saying that the books cannot give a true and fair view and so we are unable to give a true and fair view.
"The regulator... must pass a rule to say that once you (auditor) take up an audit, until you complete the work you can't go," Pai said.
Last month, Minister of State for Corporate Affairs P P Chaudhary had said that the ministry is examining recent cases of resignation of auditors from companies.
The Companies Act, 2013 contains elaborate provisions regarding liability of statutory auditors in case an auditor has contravened the provisions knowingly or wilfully with the intention to deceive the company or its shareholders or creditors or tax authorities.